The weak June jobs report confirms the concern about the U.S. economy that has rippled through the economy over the past week, and the Federal Reserve may decide the best way to counteract that is an interest-rate cut at its meeting later this month.
“If the Fed wants to interject a positive surprise and get in front of the groundswell of doubt, June would be a good time to do it,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago, in an interview.
More economists are now saying the central bank is likely to ease interest rates this year.
See: Disappointing jobs report pressures Fed to act
The U.S. economy added only 75,000 jobs in May and there were significant downward revisions to the past two months.
Read: U.S. adds 75,000 new jobs in May and spring employment gains scaled back
“There were hopes [ahead of the report] that the number would be a counterweight of the negative sentiment that has rippled through the bond market but instead we got confirmation of concern,” Tannenbaum said.
The market is pricing in a 30% chance of an easing in June, up from 20% before the data, according the CME Group’s FedWatch tool. The 10-year Treasury yield
fell to 2.06%.
The Fed might not want to ease, he said, but both of its mandates — stable prices and full employment — are now flashing the need for lower interest rates.
Richard Moody, chief economist at Regions Financial Corp., said the Fed was likely to wait until July to ease to see if the weak May reading “is a blip.”
The rate of job growth was still more than enough to put pressure on the unemployment rate, he noted.
Scott Anderson, chief economist at Bank of the West, thought the Fed might wait until July or September.
“This is a slowdown not a oontraction,” but the Fed is faced with the fact that there is a further downside from of the escalation of trade disputes, Anderson said.